This surge has driven domestic gold prices in Vietnam to exceed VND 100 million per tael. Saigon Investment spoke with Dr. NGUYỄN TRÍ HIẾU, a banking and finance expert, to understand the driving forces behind this price movement and its potential economic implications.
JOURNALIST: - Dr. Hiếu, the global gold price has been rising continuously since mid-March, exceeding $3,040 per ounce. What factors are fueling this surge?
Dr. NGUYỄN TRÍ HIẾU: - Indeed, gold prices have experienced a significant increase, reaching $3,046 per ounce on March 20, largely due to a weakening U.S. Dollar Index, which recently dropped to around 103. Additionally, the U.S. economy is undergoing a turbulent period. On March 19, the Federal Reserve (Fed) held a meeting and decided to maintain its benchmark interest rate at 4.25-4.5% amid concerns that inflation remains on an upward trajectory, far from the Fed’s 2% target.
Geopolitical tensions, U.S. tariff policies, and the increasing gold reserves of central banks worldwide have also played crucial roles in pushing gold prices higher. However, one of the most significant catalysts is the economic policies of President Donald Trump. His aggressive stance on trade—imposing high tariffs on certain countries and products—along with stricter immigration policies and mass layoffs in the U.S. government, has generated economic uncertainty. This instability has reinforced gold’s status as a safe-haven asset.
Moreover, global geopolitical conflicts, such as the ongoing war between Ukraine and Russia and U.S. military actions against Houthi forces in Yemen, have further contributed to the rise in gold prices. Central banks, particularly in China, India, and Russia, have been accumulating gold reserves at a historic rate, further driving demand. Investors globally are seeking refuge in gold due to fears of a potential global recession, exacerbated by rising energy prices and uncertain fiscal policies.
- Will this continuous surge in gold prices have negative repercussions on the global economy?
- The rapid increase in gold prices can indeed have some economic consequences. Firstly, capital that would have been directed into stock markets is now being funneled into gold, which further exacerbates the price surge. Secondly, rising gold prices can contribute to inflationary pressures. Investors and consumers, fearing inflation, may rush to buy gold, thereby accelerating price increases in various sectors.
Furthermore, geopolitical instability typically drives up both “white gold” (physical gold) and “black gold” (oil), which can have widespread effects on the global economy. A surge in oil prices can increase production costs, leading to higher prices of goods and services. This combination of rising commodity prices creates additional burdens for businesses and consumers alike.
However, it’s important to note that gold alone cannot trigger a global financial crisis. It serves more as an economic barometer, reflecting investor sentiment and macroeconomic trends. In countries like the United States, the government does not intervene in the gold market, allowing it to operate freely without perceiving its price fluctuations as a direct economic threat. In contrast, in markets such as Vietnam and China, where gold demand is heavily driven by public sentiment, sudden fluctuations can have a more pronounced impact on consumer behavior and financial stability.
- Following the rise in global gold prices, Vietnam’s domestic gold prices have also surged past VND 100 million per tael, leading to long lines of buyers. What are your thoughts on this phenomenon?
- In Vietnam, gold has long been viewed as a form of savings. Many individuals lack formal life insurance and instead rely on gold as a personal financial safety net, using it as a means of saving for emergencies or as an inheritance for their children.
At the same time, Vietnamese investors have a strong appetite for risk and are often willing to engage in speculative trading. Many investors are riding the wave of rising gold prices, hoping to profit from short-term fluctuations. The psychological factor plays a significant role in Vietnam’s gold market—when prices increase, people rush to buy out of fear of missing out, creating a cycle that further inflates prices.
However, several concerns arise. While the domestic gold price is influenced by global trends, supply constraints within Vietnam also play a role in driving up prices. When supply is limited and demand surges, prices can skyrocket. Additionally, gold trading companies often widen the spread between buying and selling prices, sometimes by more than VND 4 million per tael, shifting significant risk onto buyers. These discrepancies make gold investment in Vietnam particularly risky for those looking to trade frequently.
Those who have been accumulating gold over time are currently reaping substantial profits. However, short-term trading remains highly risky due to gold’s volatility. Historically, when gold prices rise sharply, some investors sell off their holdings to lock in profits, leading to price corrections. The Vietnamese government has been keeping a close eye on gold speculation, as a sharp increase in gold prices can impact the broader financial market, particularly the banking sector.
Looking ahead, ANZ Bank forecasts that gold prices may reach $3,100 per ounce within the next three months and $3,200 per ounce in the next six months. Similarly, UBS Bank has revised its projection, stating that gold prices could hit $3,200 per ounce by June. With geopolitical tensions intensifying and ongoing economic instability in the U.S., these projections seem highly plausible.
However, it is important to consider potential scenarios where gold prices could stabilize or even decline. If the Federal Reserve decides to adopt a more hawkish monetary policy and raise interest rates, this could strengthen the U.S. dollar and reduce gold’s appeal. Additionally, if geopolitical tensions ease, investor sentiment might shift toward equities and other asset classes, leading to a correction in gold prices.
- Thank you for sharing your insights, Dr. Hiếu.
